Company sees profits, mortgage settlements spike in first half
AFG has announced a strong start to the 2022 financial year, recording 20% growth in net profit after tax (NPAT) for the half. The strong result emphasises the success of AFG’s ongoing diversification strategy across business lines and asset classes, the company said. The result comes on the heels of record financial performance in FY21, with 35% NPAT growth over FY20.
Highlights of the first half of FY22 include:
- Reported NPAT of $30 million, a 30% increase
- AFG Securities settlements up 192% to $1.3 billion
- AFG Securities loan book up 36% to $4 billion
- Residential settlements up 47% to $30.8 billion
- AFG Home Loans settlements up 90% to $2.8 billion
- Commercial settlements up 83% to $1.8 billion
- Capital-light, robust balance sheet maintained with $225 million in net cash and other financial assets
- Return on equity of 29%
- EPS growth of 20%
- Interim dividend 7c per share, generating an annualised yield of 6%
- Key acquisitions to build diversified scale and support broker opportunities and efficiency
“We come from a position of strength in the market of scale, reputation and financial stability,” said David Bailey (pictured above), CEO of AFG. “Our core pillars of aggregation, distribution, manufacturing, and diversification are delivering positive results for our brokers and our shareholders and competitive outcomes for consumers. Our half-yearly results reveal higher settlements across all business lines, and, importantly, the company recorded growth of 36% in the loan book of its major earnings driver, AFG Securities. This loan book now sits in excess of $4 billion. Investment in our own technology and recent fintech acquisitions position us to maximise growth opportunities and continue to improve broker and customer experience across multiple asset classes.”
Current trading
As Australian mortgage brokers’ market share surpassed 67%, AFG’s residential settlements rose 47% to $30.8 billion. Solid growth in the AFG Home Loans division drove a 90% spike in settlements to $2.8 billion, with a focus on the higher-margin AFG Securities loan book sending settlements skyrocketing 192% to $1.3 billion.
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“We set the goal at the commencement of this financial year to continue to build the AFG Securities loan book and also introduce some higher-margin products,” Bailey said. “Both of these actions will ultimately assist in offsetting margin pressures within this part of our business, and this is one of the most pleasing aspects of this half’s result.”
Bailey said the residential mortgage market was performing well.
“The removal of the Term Funding Facility for the major banks has lifted the competitive advantage of the non-major lenders, and AFG Home Loans will continue to benefit from the return to a level playing field,” he said.
Investments
“We are delighted to report the successful completion of two acquisitions in the first half to build on our earnings diversification strategy,” Bailey said. “These strategic acquisitions position AFG for future growth and optionality. Fast-growing asset finance market leader Fintelligence has a proprietary tech platform and significantly increases the scale of our asset finance distribution network, adding a further 350 brokers to our broader network. The combined group now has 3,525 brokers working to support their customers.”
AFG also acquired a stake in BrokerEngine, a fintech specialising in advanced automation and the design of customised customer journeys to optimise data and workflow. BrokerEngine will integrate with AFG’s technology platform and will retain its brand and product offering to the broader Australian broker market, AFG said.
Outlook
AFG has a $650 million market cap and a robust, capital-light balance sheet, the company said.
“AFG’s business model generates strong cash flows and, having been at the forefront of the mortgage broking industry since 1994, we have been exposed to all parts of the economic cycle,” Bailey said. “Current trading conditions affirm the growth trajectory and support our dividend policy. While we remain mindful of the changing economic environment, unemployment remains low. We are positive about the outlook of the mortgage market and the opportunity for AFG to accelerate our growth in other asset classes.”
One in 10 Australian residential mortgages are now arranged by an AFG broker, the company said.
“All of these factors translate into AFG continuing to be in a strong position to deliver ongoing broker and shareholder value,” Bailey said.
